How is leasehold land valued?

Leasehold land is valued by both the leasehold apartment owners and the land owners gaining fair valuations and the meeting in the middle somewhere to agree upon what the yearly fees will be.

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SUMMARY:

Leasehold land sits under leasehold apartments and depending on the worth of the land that will determine the amount needed to be paid per year.

It is generally calculated by square metre and by both the leasehold land owners and as well as the leasehold hold apartment owners by professional valuers.

From there an agreement is made on the amount which is usually somewhere in the middle. Each lease is paid by the size and value of your apartment, for example a bigger apartment or the penthouse will pay more annually than a smaller apartment lower to the ground.

Something to note as a leasehold apartment owner is by figuring out how the land value can be reduced, this can be due to Council restrictions, building height restrictions and other similar factors. This can work in your favour, by lowering the annual leasehold fees due. This can make the idea of owning leasehold far more attractive.

TRANSCRIPTION:

Good day. Andrew Murray here from the Apartment Specialist, talking about how is leasehold valued. And what I mean by that is leasehold land that sits under leasehold apartments and that then determines how much a leasehold apartment has to pay per year.

How is this figure come about that they pay? And it's generally a per metre squared figure, i.e. $4,000 or $4,500 per square metre.

Now it's done through evaluations. So the owner of the land, called the lessor, would get a valuation, and they obviously want the highest possible value. Then you have the lessee, which are the owners of the apartments, and they will get the valuation themselves, and they will obviously want the lowest figure.

Generally what happens is, they meet somewhere in the middle and an agreement is made. There will be that per metre squared amount times by the area of the total land that is being leased, and if they will come to what has to be paid each year.

But they don't have to pay that full figure value of the land each year. It comes down to a percentage, and this percentage is set in the lease, and it varies anywhere between five and eight percent. So, between five and eight percent of that value of the total land gets paid by all the apartment owners each year.

And what determines how much each apartment owner pays, is by the size and the value of the apartment, i.e. the penthouse will have to pay more than a studio down the bottom, for example.

Now, the big question is how you determine what is a good leasehold unit, and how I look at it is, how can a land be devalued, and that is what's key here.

So there's many ways you can devalue land or leasehold land. So I'm going to be looking at things like height restrictions set by the council. I'll be looking at floor space, i.e. what is the ratio that you can actually build on the land? What are the restrictions? Are the restrictions put in place? Are there things that are going to be happening? Is there a train going underneath the building? All these kinds of things and these different kind of factors. Is the land on reclaimed land?

So there are lot of ways that you can actually-- a lot of land in the CBD and other areas that is actually quite attractive due to the restrictions on land which will restrict the future value. Anyway, I hope that helps, with how leasehold land is valued.

If you have any questions, flick me an email at [email protected] or call +6421 424 892 and I’ll be happy to help you with your queries.

Andrew Murray, Apartment Specialist. Cheers.